1. Deposit Structure
Every project will have a different deposit structure on when payments will need to be made to the builder. The biggest advantage when buying pre-construction compared to something that is already built is the extended deposit structure. With pre-constructions, your down deposit is spread over time (usually totalling 20% of the purchase price) instead of putting it all down at once when buying a resale. Here is an example of a typical deposit structure in the GTA:
$5000 on signing
Balance to 5% in 30 days
5% in 90 days
5% in 180 days
5% in 365 days or upon occupancy.
This can be advantageous in a couple ways. This means that if you already have a significant amount of the down payment required by the builder (5-15%), you could potentially still purchase the pre-construction while saving for the last 5-10%. This will allow you to purchase a property a little sooner than if you were to just save for the total down payment and purchase once you have saved it all. International deposits are usually 35% minimum of the purchase price.
2. 10 Day Cooling Period (Rescission Period)
In Ontario, if you purchase a pre-constructed condo apartment or townhome directly from the developer, you have 10 calendar days to cancel the purchase without penalty. All deposits will be returned in full and if applicable, any interest owed as well. The 10 calendar days usually start as soon as you receive your copy of the agreement (usually day of signing) or the following day. During the cooling period, builders typically request a mortgage pre-approval from the buyer(s) to prove that you can afford the condo you are purchasing. Speak to a mortgage specialist who can provide this for you. I also highly suggest having your lawyer review all the documents to make sure everything is in good standing during the cooling period.
3. The Wait
After the cooling period is over, you will continue to make timely payments to the builder as per the deposit structure. While developers will provide a tentative completion date for each project, it is very rare for a condo to be completed on time. You will be notified of any delays.
4. Interim Occupancy Period (Phantom Mortgage)
When a condominium project is being built, ownership of the condo units will not transfer from the developer to the condo purchasers until the building is registered with the local municipality. Typically, a building can only be registered once all of the units are fully completed. But usually the lower floors in a building will be completed and move-in ready before the higher floors are completed. You will be able to move-in to your unit if it is ready even before the building is registered with the municipality. This is known as the Interim Occupancy Period. You will be notified by the developer as the building nears completion indicating when your interim occupancy will begin. During this time, you will need to pay the builder an interim occupancy fee whether you have moved in yet or not.
5. Condominium Fees
These are the fees that you pay to your condominium every month. This is to contribute to your condominium's reserve fund, operation and maintenance of the building and it's amenities. Also known as a maintenance fee.
6. Closing Costs
There will be additional costs on top of the purchase price when you take possession of your condo. The most common and largest closing costs include:
Land Transfer Taxes
Utility Hook Ups
Common Expense Contribution
Check out my article on Closing Costs for more information about each of those!
7. Status Certificate & Reserve Fund
Every condominium will have a status certificate which outlines the condo's rules, regulations and budget. This can be obtained by property management for a fee up to $100. The status certificate will also include information regarding the reserve fund. It will detail the amount in the fund and what it can be used towards.
8. HST Implications
Most price lists from developers will usually say that the price includes HST. This is only the case if you move into your condo yourself or if someone from your immediate family moves in as their principal residence. If you are an investor and it will not be used as your principal residence, you will need to pay a rebatable HST portion on your condo. The amount is determined by the purchase price and you can apply for the HST rebate through the CRA.
Assigning a unit means you are selling the Agreement of Purchase and Sale (APS) prior to title change or closing. For example, let's say you bought a condo that will be finished and closing in 2 months. You decide you want to sell the condo right now. Since the title of ownership is still under the builder and the unit has not closed yet, you could sell your APS to a willing buyer. The builder will then transfer title to the new owner instead of you. Every project will have its own conditions on WHEN you are allowed to assign your unit and if there is a fee associated with doing so.
Once a building has passed all of the city inspections and has gone through the legalities, it can become a legal entity. It will be at this time when the building transfers title of ownership to the buyers.
These are charges put in place by the government to help with the cost of building infrastructure in the surrounding area to service the building. Examples of these levies would be for schools, water, parks, art, etc.
12. Getting The Keys
You will be notified ahead of time (usually 120 days) on when you will be able to take occupancy. You will also be notified if there are any delays to the closing date.